Gary Hamel - Strategic Intent

Strategies based on imitation are transparent to competitors who have already mastered them. Moreover, successful competitors rarely stand still, so it's not surprising that many executives feel trapped in a seemingly endless game of catch-up, regularly surprised by the new accomplishments of their competitors. For these executives and their companies, regaining competitiveness will mean rethinking many of the basic concepts of strategy.

As strategy has blossomed, the competitiveness of Western companies has withered. This may be coincidence, but resourcefulness. The pace at which new competitive advantages are being built rarely enters in. In this respect, traditional competitor analysis is like a snapshot of a moving car by itself. The photograph yields little information about the car's speed or direction, whether the driver is out for a quiet Sunday drive or warming up for the Grand Prix.

Yet managers have learned through painful experience that a business's initial resource endowment, whether bountiful or meager is an unreliable predictor of future global success. This is from the Harvard Business Review Magazine from 2005.

It is from an article that became famous, an article that also became this beautiful little book that I have, strategic intent written by CK Prahalad, and our guest for this series that is just magnificent. Gary Hamel. Welcome back. Yeah. Nice to be back 2005 You know, I think it actually was originally published earlier than that, maybe sometime in the 1990s, the magazine was where I first stumbled across it, and it's published there, but also, as I said, it's published in this beautiful book.

what I really, really wanted to share about this one, Gary, was let's imagine these names are justified that they, they, they're your company today because Gary talks about companies in the 1970s. Him and CK really studied companies like that.

Gary has deep expertise in eastern culture and eastern business, and you said in 1970 few Japanese companies possessed the resource base, manufacturing volume or technical prowess of the US and European industry leaders, but companies like Komatsu, which had less than 35% as large, yes, they pounced upon competitors. They came from below, which is a really important aspect of today's show, and they took them by surprise.

Maybe we'll give an overview again for those people who may have missed our early episodes where we talked about CK but where you, and he really explored the East and saw how they took advantage of our mental atrophy or strategic atrophy in the west. Yeah. You know, it's easy to take an endowment for granted.

So the fact that your company, has a long history, the fact that you maybe have loyal customers, the fact that, you have a large installed, base, the fact that you, are located in a country with a lot of resources, a lot of technology, great universities and so on, you know, it's just easy to take that for granted and assume that that somehow insulates you from what is going on in the world. And I think you're right, Aidan.

I think you saw it when we wrote that many years ago, and you see it now. You see a certain kind of, I don't know if intellectual laziness is the right word, but certainly complacency. I think if you look at what has happened, you look at Europe, you know that has struggled outside of a couple industries, like maybe automobiles and pharmaceuticals has really struggled to maintain its place in the world.

the US has also like deep, challenges in, semiconductors, in advanced computing, in material science and so on. every company is either moving forward or going backwards, but there is no standing still. And, you know, there's no ability to rely on history as a guide to what happens next. So I do think having that perpetual healthy anxiety, that concern, and as we talked about a bit last time, Avoid the tendency to just kind of discount or explain away new challenges or new competitors and so on.

That's part of what I was talking about and just the absolutely critical role that ambition plays, in strategy. You know, at the time I was writing that CK and I were writing that, and it, you know, it's still true today, strategy was mainly seen as, , you know, we're in this industry, are we in this segment? Are we in this segment? You know, where do we price? What channels do we use? It was kind of this very static, kind of like chess game kind of thing against a known set of competitors.

And then somebody comes along and kind of throws the chess pieces in the air and says like, let's think about this in a very different way. so, you have to not only have superior resources, but you have to have superior foresight and. A bigger dose of ambition if you're gonna hope to stay relevant.

I thought I'd just touch on something before we get into the article, and that concept of strategic intent, Something you touched on there and we talked about it before we came on, is actually apportioning the time to think and the discipline of that, the discipline to learn and how much of a competitive advantage that is in this day and age where we outsource that thinking oftentimes to consultants, but we don't have it in our essence in the company.

And for me it's changed my career, this learning from brilliant people like yourself actually reading the book, which is just, I mean, that should be a price of entry, a price of admission to actually read the book. But it's so rare to actually sit through and read that book. And even getting people to attend conferences, as you know well, as I know well is so difficult to pry them away from the doing to doing more thinking.

And I just thought you'd share your concept on that because it seems to be getting worse. Well, I think it is, and I think, you know, several things are at work there. two or three things that come to mind immediately. one is so many people who are writing, creating content of the world of business and management and so on today, with social media and so on. just feel compelled to create content all the time, whether it's really deep or worthwhile or not.

I remember, a couple years ago having some conversation with some personal branding consultant And of course, their whole goal is, Hey Gary, you need to blog every day and write something every I go like, I just don't have that many really breakthrough ideas every day. They like, they, they're hard to come up with a really new way of thinking. Something that hopefully is kind of profound illuminating frame breaking.

You know, writing every day almost, you just guarantee it's, it's just triviality, So, so we're just like awash in content it's not easy to kind of sift through that and go like, well, what's really worthwhile and what's gonna last? think the second phenomena is like our attention now is so fragmented. You know, you, you go to many of these magazines online and like the first thing they tell you is how long it's gonna take you. You're like three minute read, five minute read, right?

Like, don't tell me it's a 20 minute read. Dear God, I can't spare 20 minutes. And at the same time, we're all sitting around binge watching, right? So, you know, but we just, you know, our attention is spended. so, you know, what you see is just like all these listicles, you know, five ways to do this or whatever, know, everything, you know, you wanna be like digestible and easy and whatever. Well, there's nothing that's digestible. There's nothing easy.

There's nothing quick that's gonna make a profound difference in anybody's life or in their business. And so, you know, I think that's part of it. I think, you know, the, the kind of meta level thing is obviously we're, we're, all of us are still stuck in these old organizational models and assumptions and so on.

one of the books that probably influenced me almost more than anything else , was Thomas Koons, the Structure of Scientific Revolutions, which I'm guessing must have been written in the seventies, maybe eighties, maybe even before. But, you know, he went back and, and the question he was asking is, does science proceed? Like, not smoothly, but in these leaps right? Kind of punctuated equilibrium. And, and what he argued was that in field of, of science or inquiry, you know, you get stuck.

And you get a dominant way of thinking, and it is preserved and kind of almost an intellectual hegemony. and it's preserved by, you know, the elite, those who have a stake in that way of thinking. And it takes an overwhelming amount of evidence and new thinking before you kind of break free of that and go like, okay, well that was kind of stupid. Like, maybe we should think about it this way.

And I, I remember what he, what he said, he said the future's almost, and he was talking about science, but it's too generally the future's almost always created by people who were young or had no stake in the status quo.

So I think, you know, whoever you are, if, if you care about building an organization that is more capable than average, that is better than average, you have to look for ideas, insights, and so on that are not average, right? That are, that are, that are surprising to you. And may indeed come from outside the world of, of, of, of kind, of management.

And, because most of what's written in, you know, I can, I can pick up a, a management book, a business book, and I usually don't even have to get all the way through the preface before I know whether it's worth reading or not. If it, if it basically takes 90% of the existing way we think about strategy management market as a, as a given.

Okay. You know, may, maybe it's helpful to you if you're like a beginner and you're starting out, but you've been around a while, been inside organizations for a while. You really have to make a concerted effort to look for things that kind of outside the norm. And sometimes those things will be stupid. Right? And you go like, well, that was wacky. the highest compliment I ever get is when somebody reads something I wrote and say, Gary, was like completely.

Illuminating and unexpected, but completely logical, you know, that's, that's what you're going for. So I think, you know, some of the people we've talked to through our interviews, like Bill Gore, who started W Gore or Jaman at hire. These people were deep students of management thinking, right? And, you know, if you start to think about management, really this very important social technology, we'll come back to this. you really want to understand, what we take for granted.

What is the state of the art? What's out on the bleeding edge? I would guess that most people in management and business, they don't read one management book, business book a year. Like, what the heck? Like how do you stay up to speed? when I first met Minno, when I was in his office in Ingal, He had a giant wall filled with every management book that I could imagine, like a C'S worth. and he could quote it and he knew it.

so yeah, we have to avoid this tendency to be, lazy and to be, content with the incremental and the trivial. And, just take the time to look for the deeper truths. And that thing you said like the best business people I know are learners. They're constant learners and UN learners. They challenge. I was thinking about when you were saying that about Kun and the plank principle Max Plank, the whole idea that science advances because people die off.

And how you told me and I learned from you how the same happened with generals. they actually used the same old strategies and were killing people on their own. And it was only, they only changed and adopted the new technology because , the generals died off. But I was thinking about that deeply that the same thing happened.

I dunno if you know this when, say you, you were a professor or you put out some scientific paper that young challengers don't challenge that paper until that person dies off because of the fear of the consequence of speaking truth to power and saying, I actually disagree with that, which I thought was absolutely incredible, which speaks to what happens inside organizations as well.

Yeah, the tendency, for powerful people to, deflect the challengers is pretty much, a story of human nature and so on. and last time we talked a little bit about, you know, the need for senior people to really welcome descent and to seek out people who have different points of view. I think for CK and I, I must say a lot of this, I learned from him, or at least it was instinctive for him, and hopefully it became instinctive for me.

CK was born in India, an influential family, but, outside of, the western world, the world of business and so on, did his PhD at Harvard. I started out in my undergraduate career in a very small college. I think both of us kind of felt like outsiders, right? it wasn't the usual, you know, I used to describe this and this is not the way I would describe it anymore, it's probably slightly mean to say it, but I used to talk about the Harvard, McKinsey kind of axis, right?

and you know, the people who had come up through those systems and those institutions and were venerated for their wisdom and so on. And yet, you know, they were all drinking the same bath water. They all had more or less the same way of thinking about things. And I think, CK and I both really challenged ourselves to take an outsider's view, maybe you call it a beginner's mind view.

in any conversation, the question we would ask, like, okay, what are people not talking about and why what are the assumptions that everybody has that maybe are worth, challenging, or like how does all of this, reinforce the self-interest of the people we're talking to? And those, you just train your mind to ask those questions. What aren't people talking about? What are the assumptions they have in challenged? What about this, supports their own self-interest?

are there any contrary examples anywhere in the world that might help us, think differently about this? Is there a whole nother field of inquiry that has principles that might illuminate this? Right. And you train, you know, I think I mentioned sometime before, and it's even more true in the world of ai, that you know, it's impossible to create value by knowing more.

You only create value by knowing different, kind of training yourself to have that outsider's point of view, and almost by definition, sometimes it'll make you like. you'll have some enemies and it'll be seen maybe as, I don't wanna say a crank, hopefully not that, but certainly as, yeah, guy's a little bit off on the fringe, but I don't know of any other way to really say something that's new and worthwhile. Otherwise, it's an, otherwise it's an echo chamber. Absolutely.

and I love, you know, your visual way of thinking through cartooning as well. My version is metaphor. Metaphor helps me stick the content to, so it stays with me. And one of the metaphors that came to mind is to do with strategic intent. I started to write an article as I do about, mostly 'cause I have so much content from great books like this. And then it let, I let it marinate and then something will happen and I go, oh, that's, that's that thing in real life.

And the great movie director, James Cameron, the guy who brought us movies like The Abyss and Terminator, I read about what happened with him with Terminator. He had this great strategic intent. He had this real ambition about creating this amazing machine. And the technology just wasn't available yet. But he really put a massive challenge to the technologists and tried to push them, but they just weren't able to push far enough. So that was Terminator one. It was only a 6 million budget.

And then he made the movie The Abyss and the technology had come on and he made, if anybody remembers this, this liquid kind of alien, undersea alien. And then Terminator two came along and he was able to do what he wanted for Terminator one in Terminator two and made a massive box office hit.

And I thought about how it's exactly what you talk about in this article and this book is the strategic intent drove them, but also they were willing to go as far as the capabilities would bring them, but then build new capabilities. And then there's a shift in the market someplace and they're unlocked.

Yeah, that's, you know, I think everybody, somewhere in your life, you need to have this thing in the back of your head, this thought that says, wouldn't it be great if Something that's ambitious, something that you would like to do. Certainly James Cameron had this vision of what he wanted to communicate, what he wanted to see on the screen. Right? and, but, couldn't quite bring it to bear. But that's the only way you create the future, right?

You have to have, you know, and I think just so many of this are just captive to, what is and struggle to think about what could be. and we're told all the time, well, that's like impossible. Can't do that. That's not gonna work. I mean, I have that experience like literally almost every day where I challenge somebody or some organization, whatever, and like, well, you know, has anybody ever done that? And I'm not sure that's possible. Does the technology allow it?

And, there's hardly even the willingness to say, okay, let's just think about whether that's a worthwhile thing to do. And now let's see, like what? Like, okay, how might we do? It's just impulse to make immediate judgment, right? And like dismiss or not based on immediate feasibility is so deep in how we think.

You know, one of the, I've I've been reading, I think we, I mentioned this name and he's, somebody you know as well, Ian McGilchrist, and then I've been reading a book by David Bentley Hart called, I'll get the title wrong, but I think it's something like The Gods are in All Things. it's really, a treatise on human consciousness, and particularly kind of on the left brain, right brain. And Ian Mcg writes about the same thing.

And I think, you know, in business that the, you know, we've just way over indexed on pragmatism. we've way overindexed on like supposed rationality, in other words, like left brain rationality. and you know, so you have organizations that are just not capable of doing great things. And of course, if, if you know that if you're a bureaucrat, you know, bureaucrats are paid to, root out unhelpful exceptions, right? Variances that, you know, degrade quality or whatever.

Well, the dangers that after a while, every variance looks, you know, every, every exception looks to you like a threat. And so, you know, as, as you've seen in public and private sector, is kind of the ratio of bureaucrats. Everybody else goes up. the, you know, there are fewer, fewer exceptional ideas or things that like get in the oxygen. And so organizations become more, more mediocre.

And, so that's, you know, that's very much the spirit of, of that piece on strategic intent that you have to work to imagine a what before you have a conversation about the how and like and, and, and work backwards to then invent the how right?

Rather than just assuming that, you know, when Komatsu and I used to teach that case. It's an old, old case. I doubt it's taught anymore, but a case of Komatsu versus Caterpillar. And of course Caterpillar's a fine company. I think, you know, they're still around and doing great. But Komatsu is also a very strong company and came kind of outta nowhere. Komatsu had this ambition that was completely unwarranted by its size or resources, right? Let's encircle Caterpillar.

And of course they did that by going to the markets where Caterpillar wasn't so strong, where, you know, the markets weren't so big or whatever. in developing countries and so on, and built out their strengths. much like Chinese companies have done more recently. but, you could just imagine like, Maru, what, are you insane? so yeah, that's why, as I probably mentioned, but I'll say it again, very few organizations are generally resource constrained, but many are ambition constrained.

Absolutely love. Up man. And the Komatsu case. In this paper you talk about their ambition, their strategic intent was to encircle caterpillar. I love that. And the language of that is really important because sometimes it's a sidestep around them. But the concept of coming from below. The way I think about this is the military term, which is undermining, and many people don't know what it actually means, but it's like when there's a big castle wall around a castle.

The idea was that soldiers would bury under the wall and build a, a wooden structure to be able to hold up the ground, and then they'd leave it and they'd burn the structure and literally the walls would come tumbling down. So what was their strength now became their weakness, and they were undermined. And this is what all these companies did. They undermined their competitor. Cannon wanted to beat Xerox Honda, strove to be the second Ford, which was important as well.

But they were high ambitions like James Cameron we talked about. But they came from below and many of the US kind of looked at them, saw them, didn't see them as a threat or had outsourced to them in the first place. And then they went at the weak parts of the market. And I really, really, if there's nothing else we get across today, Gary. It's that history doesn't repeat what it rhymes that, that's exactly what happens banks with, with these competitor banks.

They often gnaw away at pieces of the customer pie that the banks don't want or don't see worthwhile, and then they build capability over time and they come and they encircle them from below. Yeah, I think, what is easy offered to see is a competitor's tactics, and their resources. But what is much harder to see is, are their intentions. And so you can assume, you know, and so you wanna spend a lot of time thinking about. Like, what do they say about this company?

what, you know, who are these people? what are they setting out to do? let me give a couple of contemporary examples, both of which happen to be kind of in, sporting goods and sportswear. you look at the Swiss company on running and I spent a little time talking to those folks. you start and go like, well, this is like a little niche thing. They're somehow like, claiming Swiss engineering and a running shoe. Isn't that kind of precious? And like, let's see where this goes.

Well, and then they just start building and building and building from there. And then you have all the running gear and the whatever. And then they're, and, and of course, you know, because initially they can't afford the big brand investments of a Nike, Adidas. They go to all the running clubs and they're like people try their gear and so on. And so, you know, you had some super ambitious founders and you know, the thing is like, yeah, okay, like they're going to, pick away the margin.

No. What if they wanna go right after you? But obviously they're not gonna attack you head on by definition, as you said, you can't afford it. they die on the hill. So you'll find a way of undermining it. Another funny example, and I don't how successful there'll be, there's, there's a company called Vice, like, you know, VICE, that started out making golf balls, world class golf balls, but for less than Titleist would charge, which is now maybe $60 a dozen or something.

so they were maybe, maybe 60, 70% that and very, very good quality. So you can look at 'em and they were direct to consumer. So, and very little marketing. you can say, all right, well there's some like low end direct to consumer market for golf balls. Like, that's fine. Well, if you look at them over the last five years, they steadily expanded into golf clothing.

They're now making golf clubs that are very well reviewed and you know, they're gonna be a competitor to Titleist, to tailor made to whoever, like is in that industry. So, you know, the things you wanna look at is, you know, what's their velocity, right? How quickly are they gaining market share, moving? What kind of people Are they hiring, are they hiring people with new skills? Is it clearly they may trying to be, build, build new capabilities? you know, exactly where are they investing?

What, what are they patenting? So, you know, you want to get a sense of velocity and trajectory, not just how big you are. we talked the other day about, Adidas versus Lululemon, right? Oh, isn't this yoga thing kind of cute? some organizations, obviously do top out and end up being a niche, I don't think that, Mercedes and BMW have to worry particularly about Ferrari, right? That's fine. But, they sure as hell needed to worry about Hyundai and now their, brand genesis and so on.

So, worry about velocity, worry about intention, and to some extent about resources as well. But if you use resources as the barometer, you'll get surprised. That thing about resources. I, I found this, we, we were talking, Gary has run events in the past, and I'm running events now, but the thing I noticed was the importance of hunger. And if you're small and you're starting off, you're really involved.

The founders really involved hunting things, going after things, being involved in everything. And then as you grow bigger and bigger, that becomes diluted and that energy that comes from you and then you hiring people and of course they're not gonna care as much as you care. And, it's such a hard thing to not let happen as you get bigger and bigger.

Minnows a Komatsu at the start compared to a Caterpillar or they were in some ways like the way Ford looked at Tata for example, and kind of snuffed at them and laughed at them, and then they came and actually bought Land Rover, et cetera. That, that the hunger is what goes and often like a family company like Ford, generation after generation, that gets diluted as well. And it's just incredibly hard to keep that energy going.

And one of the things you said on our last episode of, leading the Revolution, one of the, the penultimate episode, you were saying that it's just so few companies a actually make it. They don't reinvent time and time again because it's just so hard to do. So.

Yeah. And you know, and part of that, you can argue, and people have had this, you know, they say, Gary, why do we care whether are resilient or not? Why do we care about institutional longevity? Creative destruction comes, you know, the old guard gets washed away, the new players come. This is a healthy thing. and in one sense, I for sure agree with that. I do not think we want more upon companies propped up by the state.

Nor do we want them, using market power and killer acquisitions to kind of hold on to lost glory. so yeah, for sure. I mean, I'm happy for startups. I'm happy for the youngsters and the insurgents who will come along and hold the geezers to account. One, companies are getting better and better at holding off the newcomers for a variety of strategies. and even, large institutions do not die, easily.

I think General Motors has probably been losing market share for 40 years or 50 years, and it's still there, and yet they can waste a lot of society's resources, use their political clout and so on. GM got bailed out. So, we do have to worry about the resilience of these organizations. The other thing is you know, a lot of these large organizations have lots of employment when they fail, there's a large, large cost to society. So I kind of have the view both like, Hey, I don't wanna no org.

We should, we should never protect an organization from its own stupidity, right? Like, that's not the job of the state or anybody else. Having said that, we do have an incentive. In ensuring that these large organizations or new organizations that has size and employees and whatever, like they have the best chance at reinventing themselves because that, that is better for society than just letting them slowly die or become moribund.

So, you know, you can, you can believe both of those things simultaneously that, don't bail them out, but don't write them off prematurely either. That was such a valuable point that I learned from you, that idea that we need them in countries, we actually need these, and there's a moral obligation on governments to keep them alive because if, and to also save them from themselves in some case. places like Ireland, we need that a lot over here.

I wanted to just go into a couple of the characteristic of strategic events here. So you give a list of these characteristics. I'll have to jog your memory a little bit here, so I'll give you a little excerpt from each of them. The first was that strategic intent. Once you establish what that is for you, like for example, you say Coca-Cola was to have a Coke within arm's reach of everybody. It's stable over time. So that was the first one.

Strategic intent provides consistency to short term action while leaving room for reinterpretation.

As new opportunities emerge at Komatsu encircling, caterpillar encompassed a succession of medium term programs aimed at exploiting specific weaknesses in Caterpillar or building particular competitive advantages. When Caterpillar threatened Komatsu in Japan, for example, Komatsu responded by first improving quality, then driving costs down, then cultivating export markets, and then underwriting new product development.

There's so much in there that can be learned by organizations for their own version of Komatsu versus Caterpillar.

Well, I think one of the things there, is, is being able to look at strategy in, in maybe three time, time timeframes. there's, you know, the next 90 days, what are we going to do, and what do we do differently? Are, do we make some new acquisitions? do we reve resources in some way? Do we hire new people? There's a kind of year to three year timeframe. and then there's the maybe three year plus. I think in many organizations it's that one to three years that is the real focus.

So there's no broader, ambitious goal that has challenged you to reinvent who you are that has challenged you to REVE and redirect. And in the short run, they are very, tightly wired, very stuck, and can't move and have very little agility. And so I think the way I used to describe this, and I may struggle to describe this for a moment, is if you look at these ambitious companies, they have a lot of clarity around the goal and a lot of flexibility around the means, right?

Co like Gorilla aren't constantly willing to rethink kind of the opposite into it in many organizations, right? You are very vague and have very little clarity around the long-term goal and are very orthodox in the short run. It's like means more of the same. Well, who's gonna outmaneuver who in that, you know, in that scenario. so, you know, there's a general perception today that in a world of so much, turbulence, it's impossible to have a longer term goal. I think that's completely wrong.

I mean, obviously the goal cannot be overly specific, when I think about Roche and whether this goal will survive, over time, I don't know. But, you know, their goal of creating three times the patient impact at half the cost, which requires you to think very differently about everything in your organization. You know, in most organizations, no one has the courage to set that kind of a goal because, you know, question everybody asks you is like, how is it worthwhile?

Like, wouldn't that be fantastic? What do you find in all these organizations?

You work backwards from the future, not forward from the present. You work backwards from the future, and then you ask, all right, if that was our goal, what does the potential path, what are those intermediate goals? I just think in most organizations, complete lack of clarity, ambition in the long term, hell of a lot of orthodoxy and incrementalism in the short term. that's a definition for slow death and stasis.

but reason I think we've got there is that, executives, a lot of executives lack the courage, maybe the imagination, but lack the courage to stake their colors to the wall and say, we're gonna try to do something bold. And it may take a while and it may not work. but you, surrender the future to people have more ambition and more agility.

And to link it back to what we talked about, so few leaders certainly I've worked with are learners until you learn, you don't know the value of that learning because it literally makes you think differently or rewires your brain differently. It's like different lenses to see the same thing as somebody else and see it totally different. And I think that. It's one of the reasons I started doing the show was to learn more and to learn what witnesses.

That's kinda the way I think about the show, but the value of that for a leader, because then that makes you think bigger and have a bigger strategic intent. And then combined with the next one, which is strategic intent sets a target that deserves personal effort and commitment.

And the way you frame this one is ask the CEOs of many American corporations how they measure their contributions to their company's success. And you're likely to get an answer expressed in terms of shareholder wealth in a company that possesses a strategic intent. However, top management is more likely to talk in terms of global market leadership.

Market share leadership typically yields shareholder wealth to be sure, but the two goals do not have the same motivational impact, especially on people down the organization, they're not gonna wake up and go. Today's gonna be the day I'm gonna improve shareholder wealth. But if it's something like, for example, you say, let's beat Mercedes-Benz as a Japanese auto producer. That's strategic intent. Yeah. And, you know, a strategic intent. It doesn't have to be focused on a competitor.

I think those are some of the examples we use. It can be focused on, bringing a particular benefit to market or solving particular problems. the other benefit of having that greater ambition is that hopefully it frees you from, or reduces the chance that you define your identity as a particular business model I think of the battle, between Amazon and Walmart over the years. the moment you define Walmart as like, we run Supercenters or hypermarkets or these big stores.

Then you live or die by that particular paradigm. If instead you say we wanna bring affordable, goods to anybody who needs them through whatever means, that's gonna be, then that opens you up. And so I think, having an ambition that challenges you, it should challenge you, to look beyond whatever's the current business model, the current whatever. You know, we had this conversation about education, right?

And, if you're a business school dean and you say, Hey, why aren't we reaching 10,000 students a year instead of a thousand okay, you're not gonna do that with bricks and mortar So I think without ambition, you're very likely. I mean, somebody, you describe this to me once, I thought it was a nice analogy. They said, strategic intent like the sun that is bringing the shoots outta the ground. and so it should be something that is compelling enough.

I say it needs to be both noble and, ambitious, but compelling enough that it gives you a reason for moving outside of your comfort zone and for challenging kind of the status quo and recognizing where there limits and we're not gonna get there if we still are stuck here.

But again, investors are part of the problem here too, because they'll, immediately ask like, well, how, and, one of the risks, 'cause I've seen the other side of this, Aidan, is you can get a company with a very ambitious goal, that tries to accomplish it in an unreasonable timeframe says like, well, let's pour all of our resources and go hard at this. And as you said, example of James Cameron. the technology may not be ready.

You could have spent, when he was making whatever Terminator One, you could have had the biggest budget in the world, but there's certain things you can't do. and I've seen this, over and over again where companies get very excited about something they actually overinvest and then, have to write that off and then that creates a deep skepticism about that op well that was stupid. Why do we do that? And then you go sit on the sidelines and you know, nothing happens.

So it's you, you have to, and I, and again, I have, I used to have kind of ways of helping companies score all this. I dunno where even how to find that anymore, , but you do have to think really hard about feasibility. And, you know, is this gonna require fundamentally new science? Does it just require some new technology? who is likely to push back on this? Are we gonna face regulatory hurdles? you know, how quickly are our competitors, likely to react?

how much investment will this require and how can we offload that? I mean, there's a whole set of questions you have to go through. So you pace it, right? you want a lot of ambition, but you also don't want your spending to get ahead of what's possible or, or what you actually know. 'cause that's called risk and failure. it's a combination of audacity and prudence at the same time, which is, you know, often one predominates at the expense of the other, which is not good.

And just for anybody wondering where to find that, you can find that in competing for the future. So there's a load of tools in there as well, and in leading the revolution. So you can go back and you can get those books still. So no excuse. They're out there and still as valuable as ever.

I wanna just move on to a couple of the other things. one of the huge things is, and this is where the education comes in, is that yes, even if you're an MBA or you have a PhD, sometimes you don't know the difference between strategic planning and strategic intent So many companies I've worked in that there was a bias towards action. And what many people saw as strategy was just being given a to-do list and a goal, a smart goal that has to be done by a certain time, and that was the strategy.

There was no magnetic gravitational pull to a bigger mission. And that is so rare in so many companies. So many people listen to the show. Yeah, my company doesn't have that. All this makes such a difference to your, what your purpose is and what you, how you show up in the world. And we should talk a little bit about where this intent comes from because, you know, in some cases it just may come from a brilliant CEO that's like great.

I mean, um, I dunno who is leading, , Komatsu and where that came from. But often, you know, that's not the case. So, you know, when we've tried to help organizations create this, we do it with an open strategy process where, we're getting hundreds of people together, generating thousands of potential strategic ideas. and then looking across those for the themes and the threads.

And often the intent kind of emerges outta that almost by accident you're going like, wow, if we took all of this seriously, or if we moved in this direction, what does the future look like for us? who are we becoming? And then that will get crystallized in a kind of simple, provocative way. So in a way it's, I don't think it's largely a wordsmith exercise. It's not like, Hey, let's take the senior team to an offsite and come back with a strategic content in a day.

It has to come out of a lot of deep thinking about what's changing in the world. What do we wanna be able to say about ourselves? How high is, What's an ambition that would justify the work that we're gonna put into this organization and the lives of our people that are being spent in this organization. What would justify that? So, when we've worked to create this, it's a much more extended conversation, built out of a lot of data. What's going on in the world? What are our capabilities?

What can we do next? but all the time saying like, how big could this be? How high is that? You know, I remember talking to a very, famous, venture capitalist, Steve J said, who funded Hotmail and a bunch of other stuff, and he said, I never look at a business plan. I never like, because they're all bullshit. Anyway, the only question I wanna ask somebody is like, how high is that? How big can this thing go?

and paint me that picture and tell me that story and tell me broadly how you're gonna get there. But again, not a conversation that we have in most organizations. You know, I can, yeah. I mean, it's just not, and there's, never a conversation about the kind of 10 x goal, right. And, incrementalism and people are bored at work and, intellectually turned off and you get surprised by the future.

again, it's not that this work is so hard that it's hard to come up with an ambition, but it's just like are so caught up in pragmatism and rationality and short-termism that even the conversations don't occur. The way you put it. It was brilliant that a strategy is created in conjunction with some consultants, with just the few anointed ones, and then like Moses and the tablets, they come down, they go here, do this.

Essentially, there's a speaker we're brought in maybe to speak at these events. There's nice pastries and tea and everybody's happy, and then. They're not happy 'cause they have to execute this strategy. And you say in this Silicon Valley approach to innovation, the only role for top managers is to retrofit their corporate strategy to the entrepreneurial successes that emerge from below. And here the value added of top management is low indeed. That is such a key thing.

And this is the important thing, and this is the James Cameron thing again, strategic intent implies a sizable stretch for an organization. Current capabilities and resources will not suffice. And this forces the organization to be more inventive, to make the most of limited resources. Whereas the traditional view of strategy focuses on the degree of fit between existing resources and current opportunities. Strategic intent creates an extreme misfit between resources and ambitions.

And top management then challenges the organization to close the gap by systemically building new advantages. And once again, I thought back to some of our previous episodes how the US struggled in Vietnam. That whole idea of the bridges below the water, that that was driven by necessity. Yeah, I think once you have an ambition, then you start to say, okay, what are the big challenges we're going to have? that can be appealing to a new sort of customer. It could be a technical challenge.

Then you put that challenge out to the whole organization, like, this is what we're up to. Like what are the ideas? How are we gonna do this? you know, back to roast for a moment in their planning processes, at least the way it worked, when it was described to me, they will every year against this broader goal of kind of reinventing the farm and so on. they identified two or three really key challenges every year. and it's not like, okay, we're gonna give you an implementation plan.

They ask, dozens of countries around the world, dozens of product groups, Hey, if we really wanna make progress, tell us what you're going to do in the next 90 days. I just wanna know 90 days, what do we need to do to make progress on this? So it's a long-term aspiration with a lot of very short-term, high velocity steps and, but that intermediate kind of planning thing of the year to three year horizon in some of these organizations that doesn't even exist anymore.

This doesn't create any value. you know, it's basically a budgeting exercise. So. Um, yeah, I mean, again, I, I'm sometimes a little pessimistic. I wrote that a long time ago. I think it won the McKinsey Prize, that article for the best article of the year put in a little book. but if you say today, how many organizations have a genuine aspiration widely understood, that goes beyond, the next 24 months? I don't think it'd be a big number.

I can be pessimistic too on this because it's one of the reasons I do show is to try and make into a different media for people to be able to absorb in a different way. Maybe they're driving in traffic and they can't read. They have young kids, whatever, maybe sandwich generation have to mind their parents or their grandparents. But there's so much wisdom in these books, and if you just put it into action, you're gonna be so far of competitors. There's a couple of things you say here.

So once you have your strategic intent, you gotta, as you just said there, create a sense of urgency or a quasi crisis. The second thing is develop a competitor. Focus at every level through widespread use of market or competitive in intelligence. The next is provide employees with the skills they need to work effectively, which is rarely done. Give the organization time to digest one challenge before launching another.

Establish clear milestones and review mechanisms to track progress and ensure that internal recognition and rewards reinforce desired behavior. One of the ones, pick on any you wish there, Gary, but the idea that give the organization time to digest one challenge before launching another. That's a key one because people have change fatigue or, maybe it's it's implementation fatigue of too many things at once.

Yeah, I think there's a temptation always, just as people are reluctant to set a goal, a goal that lies outside the range of planning, right? A goal that you cannot lay it all out. And so there's a reluctance to ever, do those more ambitious, longer term things. There's also reluctance to give a challenge to the organization without already telling 'em exactly what's gonna be required to get there, right?

and here's the means and here's how we're gonna hold you accountable and here's the 23 KPIs we're gonna look at. so, you know, if, if you try to overs specify the how, initially you close off a lot of innovation, people have come up with more creative ideas for how we might get from here to there. And so, yeah, I mean, I have to respect the organization's capacity to find the path. I cannot predetermine and tell them like, this is, the way we're gonna do it exactly like this.

And again, that makes leaders uncomfortable because hey, we're supposed to tell them. And, you know, and so what they do at Rose, they give these challenges. You have all countries kind of setting their own 90 day, what they call outcome based planning. Okay, here's what we're gonna do over the next 90 days. They just make that process transparent to everybody so everybody can see all of those goals across the organization. And then they work hard to connect those teams together.

Like, Hey, you're working on this exactly How do we share expertise and so on? Or I look at my goal and say, those over there make more sense to me. That's more likely to help us make progress. Maybe we should be doing that. So you will get the consistency over time and you'll get the coherence without having to predetermine all the means. But that's the instinct. Like, let's tell people exactly how to do this. And that's the enemy of learning and improvisation.

I just wanna remind people again, it's hard to read the label when you're inside the jar, so. This could be you and see that through these examples that Gary gives. So there's great examples in this small paper, and I'll share the link to that paper as well for people who wanna read it.

In the 1960s, Japanese producers relied on labor and capital cost advantages. As western manufacturers began to move production offshore, Japanese companies accelerated their investment in process technology and created scale and quality advantages. Then as their US and European competitors rationalized manufacturing, the Japanese added another strength of their bow by accelerating the rate of product development.

Then they built global brands, then they de-skilled competitors through alliances and outsourcing deals and the moral. An organization's capacity to improve existing skills and learn new ones is the most defensible competitive advantage of all yet. So few organizations consistently invest in their competitive advantage of those skills. And how, how poignant, how relevant is that for what we're seeing today?

Well, you know, as you've said, history does kind of repeat itself and you see, what happened with Japanese competitors and happened with Korean competitors happened now at a completely different scale with Chinese competitors. and some of this is just inevitable. Although the world moves up and you have countries that had for historic reasons, huge advantage, right? There's a time when, you know, Britain and Germany dominated the industrial world and the United States and so on.

So, you know, that's not necessarily a bad thing, but if you're a particular institution and you want to maintain your relevance, yeah, I think, asking where are we gonna be? Absolutely world class. and being clear, we are not gonna surrender that. We're not gonna outsource it. We're not gonna, you know, this is where we have to be world class, but also asking what's the next layer of advantage that we built?

So that was the success of Japanese companies, you know, just layer after layer after layer, rather than saying, you know, and getting stuck. At some point it was like, okay, what is the next advantage? And of course, eventually a lot of those companies like did get stuck and they, they, they surrender the future. But yeah, I mean, I think Elon Musk put it, well, he said the ultimate source of competitive advantage is the pace of innovation. And that's not innovation, just in product terms.

it's innovation in, you know, every capability, every competence, every part of your business. And, , if you are moving faster than your competitors, you win. It's as simple as that. And, if you don't, you lose. velocity is important, but again, velocity without direction is chaos. It's brownie in motion. that's the subtle challenge in all of this, Aidan. It's not simply let a thousand flowers bloom, you need focus, you need coherence.

You need to know that over time we're working to build these advantages. We're working with this goal, so things are cumulative. So we capture those advantages of scale and scope. I don't wanna recreate Silicon Valley and have just a thousand unrelated things all bubbling up. but I do at the same time, have to have a hell of a lot to focus improvisation and not believe that I can plan for the future. 'cause you cannot.

that's, my solution to this chaotic world we live in . You still need long-term goals. They need to be broad enough to survive a lot of short-term change and then you need to be like super flexible and improvisational in the short term and, worry a lot less about probably the medium term.

So next up, Gary, you say four approaches to competitive innovation are evident in the global expansion of these Japanese companies. They are building layers of advantage. We've talked about that. I love this one. Searching for loose bricks. Changing the terms of engagement and then competing through collaboration. And then you go on to say the wider a company's portfolio of advantages, the last risk it faces in competitive battles.

New global competitors have built such portfolios by steadily expanding their arsenals of competitive weapons. They have moved , inexorably from less defensible advantages such as low wage costs to more defensible advantages like global brands. The Japanese color television industry illustrates this layering process. By 1967, Japan had become the largest producer of black and white television sets, and by 1970 it was closing the gap in color televisions. Yeah, I think, um.

I think that whole article probably is a good tutorial for any company that you feel like you're in a world of giants and you're outgunned and out resourced and like kind of, you know, where do you go next? So it is definitely having that ambition, to start with. It is using, you know, parlaying one advantage into another and not getting stuck at one layer and saying like, well, we gotta rely on others. We're never gonna get any better here. I think the loose brick ideas, yeah.

where are these guys vulnerable? Where are they paying attention? Maybe a market, a customer group, something else. You know, for Aidas and Nike, it was women and so on that they hadn't paid enough attention to. So where are they vulnerable? and yeah, I mean, I wrote a whole, doctoral thesis on alliances and what you might call competitive collaboration.

So, you know, you outsource, you work with, I mean, wonderful example of that was Microsoft, you know, convincing, convincing IBM to put, uh, the Microsoft os uh, windows inside of, you know, and IBM had this massive global presence. Microsoft is a tiny little company and now you've like inserted your genome in this big beast and it's like spreading it all over the world. And then ultimately, you know, Microsoft Parts company.

So yeah, I mean, being very clever about how you leverage the resources and the strengths of those that are larger than you. You know, it's interesting and I'll get the data maybe a little bit wrong 'cause they don't have it right in front of me. But Lilly over, just like the last five or six years now, about a third of the molecules that big pharma companies are licensing in for new drugs are coming outta China. So you start to think again, what's the velocity?

How do you go in space of three or four years from really having almost nothing to now, a third of these new molecules are coming out of small Chinese biotech companies. like what do I need to be thinking about there? So, you know, think about how you, rather than being afraid of these organizations, much bigger, more resistance, like how do you leverage them? How do you use their size, right?

How do you, you partner with them but never give up on your own independent kind of aspirations and ambitions. I can't remember what the fourth thing was there on this list. But yeah, it's, it's, you know, that's what really being strategic means, you know, being ambitious, continuing to build layer after layer, looking for vulnerabilities, leveraging the size of those around you, We reduce guided strategy to this like annual completely antiseptic, budgeting exercise.

I've said before like strategic planning is an oxymoron. Like there's no such thing. There's planning and they're strategizing. They have like literally nothing to do with each other except at some point strategies have to be, translated into action. But even there, it's less about having strategies, elaborate plans and having strategies put into kinda a lot of short term improvisation and, high velocity projects.

we took a very powerful idea strategy and we reduced it to like a completely odine process of almost no value at all.

if people listening find any of this interesting. The other thing they should read. Which, is worthwhile is an HBR article I wrote a long time ago called Strategies Revolution. it basically makes the argument that core strategy is an innovation problem. It is, you know, and it's not a planning problem, it's not a positioning problem. it's not an alignment problem. It's an innovation problem, and I think they maybe gain a few insights from that. Uh oh. We have another episode.

We'll have to cover that man as well. But it's been, uh, been an absolute pleasure. Really highly recommend that. Tiny little book. It's only, what is it? there's 90 pages, tiny little pages in it, so you'll fly through it, but don't fly through it. Take a week on it and treat it like you would treat another book and then listen here as well.

I love the color you add to this, and it's such a privilege to go through this with you and learn from you and, updated versions, the rush, et cetera, all these examples. It's an absolute pleasure, Gary, for people who want to find you, I'll link to that article and to the other article, where is the Best Place? To answer questions that people want to email me at [email protected].

you can find me on LinkedIn, easily enough and always happy to engage there on x prof, Hamel, if you wanna follow me, and, website, gary Hamel.com. So always happy to engage. Author of Strategic Intent, along with his friend, CK Prahalad. May Rest in peace, Gary Hamel. Thank you for joining us. Thank you Aidan